Accounting Terminologies

1. Capital: Owner's investment or equity in a firm.

2. Cash Discount: An allowance given by the creditor to the debtor on the amount due for prompt payment.

3. Creditor: One to whom the business owes some amount.

4. Debtor: One who owes some amount to the business.

5. Drawings: Amount withdrawn by the owner from the business for personal use.

6. Equity: The claim or right over the assets of the firm. It includes both the owner's and the creditor's claims.

7. Expenditure: Spending of money or incurring a liability for some benefit or service received by the business.

8. Gain: Profit arising from peripheral or incidental transactions.

9. Goods: Good are the mercantile things in which the business deals.

10. Income: It is the amount earned through business operations.

11. Revenue: Amount realized for the goods sold or services rendered.

12. Stock: Raw materials, semi-finished goods and finished goods lying in stores.

13. Trade Discount: An allowance given by the seller to the buyer on the list price at the time of sale.

14. Voucher: A documentary (written) evidence of a transaction is called a voucher. For example, if we buy goods for cash we get cash memo: if we buy on credit we get an invoice; and so on. Entries in books of account are made with the help of such vouchers.

15. Solvent: A person who is in a position to pay his debts as they become due.

 16. Insolvent: A person who is not in a position to pay his debts in full and is so declared by the court.

17.  Bad debts: The amount of debt which is unrealizable from a debtor who became insolvent.

18. Capital Expenditure: An expenditure which results in the acquisition of a fixed asset or addition to a fixed asset, or improvement of the earning capacity of the asset.

 19. Capital Losses: Losses which do not arise in the normal course of business.

20. Capital Profits: Profits not earned in the regular course of business.

21. Capital Receipts: Receipts in the form of additions to capital, liabilities or sale proceeds of fixed assets.

22. Deferred Revenue Expenditure: A revenue expenditure which involves a heavy amount and the benefit of which is likely to spread over a number of years.

23.  Revenue Expenditure: An expenditure whose benefit is limited to one year.

24. Revenue Losses: .Losses that occur in the regular course of business.

25. Revenue Profits: Profits earned in the normal course of business.

26. Revenue Receipts: Receipts arising out of services rendered or goods sold.

27. Capital Reserve : Reserve created out of capital profits.

28. Open Reserves : Reserves which are clearly shown in the financial statements.

29. Provision : Amount set aside of current earnings of a business for depreciation, repairs or renewals or meeting a known liability the amount of whichjs uncertain.

 30. Reserve : Amount set aside out of profits or surplus to meet unexpected contingencies or provide funds for growth.

31.  Revenue Reserve : Reserve created out of normal business profits.

32. Reserve Fund : That part of reserve which is invested outside the business.

33. Sinking Fund : A fund created out of earnings to repay a long term liability or replace an asset.

34.  Secret Reserves : Reserves, the existence of which is not revealed in the financial statements.

35. Books of Account: These are the different sets of records, whether in the form of bound books or loose sheets wherein the various business events and transactions are recorded e.g., journal and ledger. If necessary, the journal and also the ledger may be sub-divided into a number of books.

36.  Entry: The recording or entering a transaction or event in the books of account is called an entry.

37. Journal: Journal is the book of prime entry. It is used for recording all transactions and events of a business entity in the first stage